Business Practices Committee Report 75

Representatives of Alpha attended a meeting of the Committee on 28 July 1998. An independent business recorded the proceedings at the meeting and prepared a transcript thereof. Representing Alpha were Sealey, Mr Richard Lawrence (Lawrence) and Ms Elaine Douglas (14) (Douglas). Lawrence, it was said, "... represented the Alpha team and advises world wide" and Ms Elaine Douglas was "... actually a member of the company". She was in charge of the training of Alpha members in South Africa to run and operate their own businesses.

The Chairman of the Committee said that the meeting should focus on the letter of the Committee dated 17 July 1998. She referred to (a) and (b) set out in section 7 above.

Sealey, Lawrence and Douglas explained to the Committee that Alpha was involved in multilevel marketing and that it was no different form other businesses in South Africa who distributed their products through multilevel marketing. Douglas told the Committee about the presentations that Alpha gave two days a week and how hard the Alpha Club members worked to earn their money. During the discussions Sealey said that a "money revolving scheme" just invokes money and that if it was properly run and properly managed, there was nothing imperatively wrong with such schemes.

The Committee also discussed the number of reservations Alpha made on behalf of its members. From figures supplied by Sealey, it appeared that Alpha received 246 enquiries from members for holidays abroad. Only seven (2.84 per cent) of these enquiries led to confirmed bookings. Approximately 63 percent (155 members) of the 248 members, having received offers for accommodation, did not elect to avail themselves of it. Another 26 (10.5 per cent) enquirers said that they would advise the office about their decisions and 12 (4.9 per cent) informed the Alpha office that their offers were too expensive. Other members informed the Alpha office inter alia that they were no longer travelling, advised the office that their offer was not suitable, requested more suggestions and that they made enquiries only. It was earlier stated that Alpha Club offered silver card membership to all 8 300 ex Newport members.

These figures suggested that the Alpha Club members were not that interested in going aboard for holidays, but became members to "make money" by canvassing new members. Less than 0.1 per cent (7 members) of the 8 300 ex-members availed themselves of the opportunity to enjoy a holiday abroad. Sealey said that he was not surprised by the figures because members were "... testing the system" to see what was available. He said:

"Look its just because they were just testing the system. You see, I think what happened, and this is probably not really of any great relevance, but, this is my view. At 8 000 people who were bitterly disappointed to be disenfranchised. And out of the blue, and they suddenly get an Alpha club membership. Now, those 8 000 odd people were not only upset and cross, they were disenchanted. They'd lost I believe, a desire to carry on in this type of industry. They lost their believe, motivation, call it what you will. So, we expected, inevitably, a fair number of people that would, would just see if it was true, or was it, you know, all the bad press, and it's a seam, it's a scheme. It doesn't exist. I think they were just, we expected them to test the system. We welcomed it".

Lawrence said the Alpha product was membership. It was a service as opposed to "... a piece of something or, cosmetic or whatever. But, but the service is the product".

Sealey said that: "I think the reality in a way, if you buy an Alpha Club membership, and you see there is the potential to get commission by selling the product, inevitably human nature is such that people will have a go". Then Douglas said that

"... some people buy for the products, most people buy it from my experience, to run their own business. And, and that is from the experience directly from the, having our meetings at the end of the night".

This remark by Douglas confirmed that consumers became members of Alpha to make money by canvassing new members.

Sealey said in conclusion:

"in our view, it clearly is not a harmful business practice. I repeat, just like any other network marketing business. It is not based on misrepresentation. It is not based on any form of swindle. People go into it with their eyes open. They know exactly what they have to do. If they choose not to do it, at the end of the day, there is that one assumption that they must actually to get their value, want to book a holiday or want to go on a business trip. But there is nothing remotely underhand about it. It is unique, in my experience, in the amount of effort that goes into training people. The amount of assistance that is given to people they are not just abandoned".

At the end of the meeting the Chairman informed the representatives of Alpha that the Committee would set out in writing what to- the Committee constituted the harmful aspect of the operation. Alpha would then be given two weeks to reflect on that and to see whether to what extend they could adjust their operation to allay the concerns of the Committee.